Explain why, according to the separation theorem, the financing method (equity or loan) does not affect shareholders

Question:

Explain why, according to the separation theorem, the financing method (equity or loan) does not affect shareholders’ wealth.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Business Finance

ISBN: 9781292134406

11th Edition

Authors: Eddie McLaney

See More Books

Question Posted: Mar 05, 2024 07:00 AM

See More Questions

Utilizing resoorces, complete a risk audit of Bank of Americas project to acquire Merrill Lynch. Ensure you address all 10 critical success factors. From the evidence of your audit, would you advise...
This chapter examines how cultural, legal, political, and institutional differences affect a firm's choice of financial goals and corporate governance. Who owns the business? Who owns the business...
CANMNMM January of this year. (a) Each item will be held in a record. Describe all the data structures that must refer to these records to implement the required functionality. Describe all the...
PIM Industries, Inc., manufactures electronics components. Each unit costs $30 before the final test. The final test rejects, on average, 5 percent of the 50,000 units manufactured per year. The...
An article in the Wall Street Journal asks the question "How can inflation below when everything is so expensive?" The article also notes that "the CPI shows that prices are the highest they've ever...
Give a critique of using total surplus to measure the welfare (or well-being) of individuals in a market. Provide another way to measure market success.
Oil $(S G=0.9)$ flows downward through a vertical pipe contraction as shown in Fig. P5.97. If the mercury manometer reading, $h$, is $100 \mathrm{~mm}$, determine the volume flowrate for...
Consider the supply chain illustrated below: Last year, the retailers weekly variance of demand was 200 units. The variance of orders was 500, 600, 750, and 1,350 units for the retailer, wholesaler,...
Question 2 [30 marks] For this question, imagine you are an independent consultant engaged to review and check the design of a 5m deep excavation which is supported by a single-strutted sheet pile...
Zia Co. makes flowerpots from recycled plastic in two departments, Molding and Packaging. Zia uses the weighted average method, and units completed in the Molding department are transferred to the...
Why, in practice, would borrowing by the business to raise cash to pay a dividend not be economically equivalent to borrowing by the individual shareholders to provide themselves with cash? (Note...
A business has 1 million at its disposal and managers feel that this could either be invested in new production facilities or be paid to shareholders as a dividend. What does the separation theorem...
The anterior cruciate ligament (ACL) helps stabilize the knee joint. It is easily injured by hyperextension of the knee. How would you have to move your lower leg to cause a hyperextension injury?
Congress has the power to establish administrative agencies to perform which of the following functions? a. Make administrative rules. b. Adjudicate disputes arising from administrative rules. c....
Explain why the Federal Reserve was able to prevent the crisis of 2008 from turning into another Great Depression but was unable to prevent the surge in unemployment that occurred.
A merger between firms that compete with each other in the same market is not a violation of antitrust law. (True/False)
What forms of anticompetitive behavior does the Federal Trade Commission Act prohibit?
A relevant product market consists of all products with identical attributes and products that are sufficient substitutes for each other. (True/False)
A review of the accounting records of Rayford Manufacturing indicated that the company incurred the following payroll costs during the month of September. 1. Salary of the company president$32,000....
Test whether the 5-year survival rate for breast cancer is significantly different between African American and Caucasian women who are younger than 50 years of age and have localized disease....
Threads Limited manufactures nuts and bolts, which are sold to industrial users. The abbreviated financial statements for each of the last two years are as follows: Required: (a) Calculate the...
Can you think of any benchmarks, or bases, that could be used to compare a ratio that you have calculated from the financial statements of your business for a particular period?
Amsterdam Ltd and Berlin Ltd are both wholesalers serving broadly the same market, but they seem to take a different approach to it according to the following information: Required: Describe what...
Cherokee Incorporated is a merchandiser that provided the following information: Number of units sold Selling price per unit Variable selling expense per unit Variable administrative expense per unit...
When and how should supporting data be included in a memo? Discuss the use of attachments, appendices, or embedded charts and graphs to reinforce the memos message.
What techniques can be used to ensure clarity and avoid ambiguity in memo writing? Discuss the importance of clear directives and the potential consequences of misinterpretation.

Explain why, according to the separation theorem, the financing method (equity or loan) does not affect shareholders

Question:

Step by Step Answer:

According to the assumptions made by the separation theorem any dividends paid ...View the full answer

Business Finance

Students also viewed these Business questions